An improvement exchange is a powerful 1031 Exchange strategy that enables investors to upscale the quality of their investments with funds from a relinquished property that are completely tax-free.
Identify the Most Lucrative Improvement Option for a Loan
In order to get the most out of an improvement exchange, an investor is able to identify a replacement property with profitibility optimnization opportunites latent in improvement projects. When using exchange funds as a way to fund improvement costs, investors can broaden their property acquisition strategy to include buildings and land that have force-multiplying value potential packaged as construction projects.
Exchange Your Lowest-Performing Properties to Maximize Equity and Asset Improvement
When taking advantage of the improvement option in an exchange, the property owner can sell multiple of their under-performing properties in order to construct, add on to, or improve a replacement property (or properties) that have latent value unlocked by construction opportunities that multiply rental potential and likewise increase the equity of the property.
Secure Your Contractors Before You File an Exchange
When using exchange funds for an improvement, it is necessary to identify contractors and complete official documentation for the projects before filing the exchange so that escrow and the qualified intermediary can coordinate to apply exchange funds to exchange-identified opportunities.
The improvement strategy can be used in both a Standard Exchange and a Reverse Exchange model, meaning that improvements to the replacement property can be performed after properties are sold and the replacement property is subsequently purchased (Standard Exchange), or the replacement property can be purchased before relinquished properties are sold, and the improvements applied to the replacement property within 180 days of its closing date.
Conclusion
Follow these steps to use the improvement exchange method to upscale your current real estate portfolio so that your properties produce more profits, require less maintenance, and appreciate at an exponentially higher rate of return. Schedule a consultation with one of our loan experts to build a profitable loan strategy for your 1031 Exchange.
